• by Catharine P. Taylor , September 17, 2008

Sorry not to be writing this week about all of the cool stuff that we'll talk about at OMMA Expo tomorrow and Friday, or the news of the new LinkedIn Advertising Network, or LiveWorld's new app that can turn any site into a social networking site instantaneously.

It's hard to focus on anything right now except for the crisis on Wall Street. I'm no financier, but it's easy to see that, even for those of us who don't know a credit-default swap from a swap meet, whatever the hell is going on down there is going to have a huge ripple effect, even among hot businesses like the social media sector.

As layoffs cut through the financial world and beyond, those of you in the social networking space will feel it, too, and this will happen in good ways and bad.

Because I'm an optimist, I'll go with the good news first: The financial and economic crises will cause grown-ups who aren't already there to flock to their nearest social networking site like moths to a flame. Networking, as in business networking, will be hotter than ever, as those who've lost jobs, and the bigger group of those who fear they will lose their jobs, make sure to "friend" anyone they ever passed on the street. In an economic situation where so much is out of our control, many of us will turn to the career insurance policy of making sure that we stay visible, and social nets offer a way to do that that didn't really exist last time the economy was in this kind of fix, earlier in this crazy millennium.

The second piece of good news is that we'll be spending more time at home, and that will definitely drive up traffic to social media sites. Even if most of the people who read this aren't already addicted to social networking, think of how much of it we'll be doing when we're giving a second thought to going to the multiplex to watch another lousy movie while munching on overpriced popcorn. A microwaved serving of Orville Redenbacher, a cheap Internet connection, and a greasy keyboard will do just fine as conduits for entertainment, much of which will include interacting and sharing content with our other un- or under-employed friends.

The bad news, as you might have suspected, is that advertisers probably won't vastly increase their interest in following this particular set of eyeballs and will probably even pull back on social ad spending, unless they can prove its efficacy -- which, for most social media sites, is a work in progress. To those of you who haven't seen this movie before, the plot goes something like this: marketers, jittery about their budgets, shut down the experimentation spigot and retreat to areas they are more accustomed to, even if those old channels have questionable appeal. To me, it's like the sequel to the movie that played in 2000. Let's call it "Dot-Com Bubble 1.0."

Back in 2000, Internet advertising was the experiment, and as we all know, the entire sector took a beating for several years until, fortunately for digital media mavens everywhere, it came roaring back. What got lost in the bursting of the dot-com bubble was that consumers never left the medium, just marketers.

In 2008, for most marketers, social media is the experiment; older forms of Internet advertising, the tried-and-true. In fact, I believe what most of the pundits are predicting: that many forms of digital marketing will continue to grow, because they are accountable. Even old hands at marketing -- including those who could still be accused of being overdependent on traditional media -- understand that in a down economy, ad budgets should go first to the media that have the best ROI, and Internet advertising is at the top of the list.

The problem with social media is that, as a marketing medium, it's about where Internet advertising was in 2000: really cool, part of a hot, new medium, but with metrics that make it hard to sell to the CFO. Even as social networking continues as a consumer phenomenon, advertisers will remain cautious. It's not fair, but it's just the way new ad markets work.

The silver lining (here's my optimism again) is that hard times will make social networks work even harder at proving the efficacy of their medium. Ask any Internet executive who was around during the downturn that began in 2000; I think every one of them would say that such self-reflection turned out to be a good thing.